DISTRIBUTION OF MUḌĀRABAH PROFITS IN CLASSICAL SCHOOLS OF FIQH: CLARIFICATION OF A MISCONCEPTION

Cizakca (2011) states that profits in a muḍārabah contract, according to the Mālikīs and Shāfiʿīs, follow the same formula as in a joint active partnership (ʿinān).1 This means that both profit and loss in a muḍārabah contract should be distributed between the investor (rabb al-māl) and the entrepreneur (muḍārib) according to the proportion of capital contributed. He further argues that, conversely, it is only the Ḥanafīs who tolerate the sharing of returns between the two parties based on any percentage that is mutually agreed to by them; hence, permitting departure of profit distribution from the capital investment ratio. Meanwhile, he remains silent about the view of the Ḥanbalīs on this matter.